Proposed AB 32 Cost of Proposed Implementation Fee Regulation · 4/20/2009 · • Loan repayment required in 07/08 and 08/09 Budgets • Collected revenues shall be used to administer

PPrrooppoosseedd AB 32 Cost ofImplementation Fee Regulation

Public Workshop

Proposed AB 32 Fee Regulation

Proposed AB 32 Cost of Implementation Fee Regulation

Public Workshop California Air Resources Board

Office of Climate Change April 20, 2009

Sacramento

Workshop Documents


Workshop Documents

• Slide Presentation • Proposed AB 32 Cost of Implementation

Fee Regulation and Proposed Amendment to the Mandatory Reporting of Greenhouse Gas Emissions Regulation

• Fee Expenditure Background Document

2

Introduction


Introduction

Workshop Objectives – Provide updated timeline – Discuss changes to the proposed Fee

Regulation – Discuss amendment to the Mandatory

Reporting Regulation – Provide information on Fee expenditure

3

Updated Timeline


Updated Timeline April 24, 2009 3rd Workshop Comment Period Ends

May 8, 2009 Initial Statement of Reasons Published

June 25/26, 2009 ARB Board Hearing

Summer/Fall 2009 Final regulatory package submitted to the Office of Administrative Law (OAL)

December 2009 Affected Entities report 2008 emissions to ARB

January 2010 Fee Determination Notice sent to Affected Entities

March 2010 Affected Entities remit fee to ARB 4

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Overview of the Fee Regulation

Fee Background


Fee Background

• Authorized by AB 32, HSC section 38597 • Included in Scoping Plan/approved by Board • Loan repayment required in 07/08 and 08/09

Budgets • Collected revenues shall be used to administer

and implement AB 32 – ARB and other State agencies – Support Scoping Plan – Repay start-up loans for ARB and Cal/EPA – Funding to be secured beginning with 09/10 Budget

6

Fee Approach


Fee Approach

• Broad-based, economy-wide • “Upstream” entities • Minimize administration costs

–ARB –Affected Entities

• Consistent with existing programs • Use of existing data

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8


Applicability

Breakdown by Sector


Breakdown by Sector

Greenhouse Gas Emissions by Sector included in the Fee Regulation

412 MMTCO2E Associated Gas (0.8%) Gasoline &

Electricity Diesel (45.2%) Imports (12.1%)

Coal (2%)

Cement Process

Natural Gas (1.4%)(30.2%) Refinery

Process (8.2%)

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AAff ffeecctteedd EEnntt ii tt iieess


Affected Entities

• Natural gas: utilities, select users, and pipeline owners and operators

• Producers and importers of transportation fuels

• Refineries • Cement manufacturers • Importers of out-of-state electricity • Facilities that combust coal

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Natural Gas


Affected Entities

Natural Gas • Public Utility Gas Corporations • Interstate pipelines that deliver natural gas directly

to end users • Intrastate pipelines that deliver natural gas directly

to end users • Natural gas producers subject to ARB’s

mandatory reporting regulation consuming gas produced on-site

• Oil production operations subject to ARB’s mandatory reporting regulation that consume “associated gas” produced on-site

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Affected EntitiesAffected EntitiesAffected Entities

Producers and Importers of CaliforniaProducers and Importers of California transportation fuelstransportation fuels

• California gasoline

• CARBOB • California diesel


Refineries


Affected Entities

Refineries • Refineries that produce, consume

Catalyst coke Petroleum coke

Refinery gas or utilize

Steam methane reforming processes

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Affected EntitiesAffected EntitiesAffected Entities

Cement ManufacturersCement Manufacturers

• Direct, non-combustion related, CO2 emissions from clinker manufacturing

Affected Entities


Affected Entities

Imported Electricity

• Retail providers & marketers • Fee assessed at the first point of delivery in

California

For Fee Regulation only

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Coal Combustion


Affected Entities

Coal Combustion Entities using coal as a fuel and subject to ARB’s Mandatory Reporting Regulation

• Cement manufacturers

• Cogeneration facilities • Others

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Other Emissions


Other Emissions

• Emissions not covered by Fee Regulation (15%)

• High Global Warming Potential Gases (3%) – Separate regulation being pursued

• Other GHG sources (12%) – Non-CO2 Agricultural processes

– Forest sector – Other fuels

e.g. Aviation gasoline, jet fuel, kerosene and biodiesel 17

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Entity-Specific Reporting Requirements

Reporting Requirements



Natural Gas • Public utility gas corporations

– Therms of NG delivered to end users at the meter • Interstate and intrastate pipelines

– Therms of NG gas delivered directly to end users at the meter

• Natural Gas producers consuming gas produced on-site and subject to ARB’s mandatory reporting regulation – Therms of NG produced on-site that are consumed on-site

• Producers that consume “associated gas” and are subject to ARB’s mandatory reporting regulation – Emissions resulting from combustion of associated gas

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Producers and Importers of Transportation Fuel • Gallons of California gasoline, CARBOB, and Ca

diesel supplied for use in California

Refineries • GHG emissions that result from the refining

processDirect process emissions from the steam methane reforming process

• Combustion emissions from refining process by-products from:

Catalyst and petroleum coke Refinery gas 20




Cement Manufacturing • Direct CO2 emissions from clinker manufacturing

Imported Electricity • Based on MWh from each affected entity,

reported per Mandatory Reporting regulation

Coal • Tons of coal and the associated grade of coal

combusted

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Additional Requirement – Required use of ARB’s Online Greenhouse

Gas Reporting Tool – Tool will be modified to facilitate use with

the Fee Regulation

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Fee Calculations

Fee Calculation


Fee Calculation

Common Carbon Cost (CCC) – Annual cost of the program (current fiscal

year) • Total Revenue Requirement

– Annual emissions (previous calendar year) • Quantities of reported fuels, imported

electricity, and emissions • Source-specific emissions factors

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Fee Calculation


Fee Calculation

CCC= TRR (Qng x EFng) + (Qg x EFg) +(Qd x EFd) + (Qc x EFc) + (Qie x EFie) + TEi

TRR = Total Required Revenue

(Qi x EFi) = Quantity of fuel/electricity multiplied by the emission factor for fuel/electricity

TEi = Total state process emissions inventory for cement manufacturers and refineries, and emissions from the combustion of associated gas

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Total Required Revenue


Total Required Revenue

Total Required Revenue (TRR) is the sum of

1) Required Revenue (RR) • AB 32 expenditures budgeted for a fiscal year for all state

agencies based on the approved state budget and • Debt repayment

– Fiscal years » 09/10, 10/11, 11/12 and 12/13

And

2) Annual adjustments for excess or under collection 26

Specific Fee Calculations



Fee Rate • Fuel/Electricity/Coal

Fee Rate = CCC x EFi

• Process Emissions CCC serves as the Fee Rate

Fee • Fuel/Electricity/Coal

Fee = Fee Rate x Quantity of fuel/electricity/coal supplied, consumed or produced

• Process Emissions Fee = CCC x Quantity of Emissions

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Specific Fee Rate Calculations


Specific Fee Rate Calculations

• Natural Gas Fee Rate = CCC x EF for natural gas

• California Gasoline and Finished CARBOB Fee Rate = CCC x EF for gasoline

• California Diesel fuel Fee Rate = CCC x EF for diesel

• Cement and Refinery Process Emissions, Associated Gas

Fee Rate = CCC • Coal

Fee Rate = CCC x EF for coal* *each grade of coal has its own emission factor

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• Associated Gas Fee = CCC x Emissions associated with gas consumed

on-site or supplied

• Imported Electricity Fee = Fee Rate x Quantity of Electricity Imported by each entity

• Fee Rate = CCC x Emission Factor (MWh) for each source

Emission factors (MTCO2E/MWh) for: • Generating facilities • Asset-owning & asset-controlling suppliers • Unspecified sources

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Imported Electricity continued . . . • Emission Factors for Specified Sources

– Generating facilities • Fuel use, emissions data reported to ARB or taken from EIA

and EPA data • ARB calculates specific emission factor and fee rate for

imports from generating facility

– Asset-owning or -controlling suppliers • Must be issued a supplier-specific ID and submit data per

Mandatory Reporting • Emission factor is weighted average of EFs for generating

facilities and purchased power (including unspecified power with default EF) 30




Imported Electricity continued . . . • Emission Factors

– Unspecified sources • Default emission factor of 0.499 MTCO2E or 1,100 lbs / MWh • Based on CPUC and CEC recommendation for the Mandatory

Reporting Regulation • Not a precedent for treatment of unspecified imports in any other

regulation • Will be revisited pending development of Cap-and-Trade

regulation

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Proposed Implementation ScheduleFirst Two Years of the Fee


Proposed Implementation Schedule First Two Years of the Fee

Year 1 December 2009 Affected Entities report 2008 emissions to ARB

using the GHG Reporting Tool

January 2010 Fee Notice Sent to Affected Entities

March 2010 Entities Remit Fee

Year 2 June 2010 Affected Entities report 2009 emissions to ARB

January 2011 Fee Notice Sent to Affected Entities

March 2010 Entities Remit Fee

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Mandatory Reporting Regulation

Mandatory Reporting Requirement



• Mandatory Reporting Regulation Amendments : – Entities subject to the Mandatory Reporting

Regulation required to use ARB’s Online GHG Reporting Tool

– New Section added--95104(e)

– Reporting tool use no longer voluntary

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Greenhouse Gas Reporting Tool • Web-based platform for reporting information

required by ARB’s Mandatory Reporting Regulation – Ensures complete reporting to ARB – Provides reporting, QA, certification, tracking, and

verification access – Designed to facilitate reporting & ease

administrative burden – All reported information is held in a secure,

password-protected database 35




Greenhouse Gas Reporting Tool • User friendly

– Comprehensive user guide, sector-specific reporting guidance, and training videos available

– Training Site provides practice with Tool’s structure and function

• Data fields to be added for entities subject to the Fee regulation

http://www.arb.ca.gov/cc/reporting/ghg-rep/ghg-tool.htm

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http://www.arb.ca.gov/cc/reporting/ghg-rep/ghg-tool.htm

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Preliminary Costs and Fee Estimates

Eligible Costs


Eligible Costs

Limited to state agencies’ activities and programs costs directly related to AB 32 Implementation - Formally approved staff positions

- Other costs directly related to administering AB 32

Eligibility for funding

-FY 2007/2008 – ARB and Cal/EPA -FY 2008/2009 – ARB and Cal/EPA -FY 2009/2010 – Approved State Agencies

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Non Eligible Costs


-Non-Eligible Costs

• AB 32 compliance costs • Non-state agency costs • GHG reductions achieved as co-benefit

to principal agency activities • Pre-existing GHG reduction programs • Activities related to adaptation or CEQA

analysis for projects

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Approval Process


Approval Process

Example: Fiscal Year 2012/2013

Sept. 2011 State agencies submit BCPs to DOF Fall 2011 DOF approves or denies BCPs based on

criteria Jan. 2012 Approved AB 32 BCPs included in Governor’s

Proposed Budget � CalEPA issues “Preliminary AB 32 Crosscut Budget Summary”

Summer 2012 New Budget Approved � CalEPA issues “Approved AB 32 Crosscut Budget Summary,” �RR 2012/2013 based on Budget Summary 40

State Agency Costs for FY 09 10Preliminary


-State Agency Costs for FY 09-10Preliminary

Agency Positions Funding ($millions)

Calif. Environmental Protection Agency 6.0 1.8

Calif. Air Resources Board 155.0 33.1

Integrated Waste Management Board 7.0 1.6

Calif. Energy Commission 4.75 0.6

Department of Food and Agriculture 1.9 0.5

Department of General Services 2.0 1.4

TOTAL 176.65 39

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Year 1 3 CostsPreliminary


-Year 1-3 CostsPreliminary

AB 32 Implementation Costs 2007/2008 – 2009/2010

Fiscal Year Program Cost ($ millions)

2007/2008 24

2008/2009 32

2009/2010 39

Total 95

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Breakdown of Start up Costs


-Breakdown of Start-up Costs

2007/2008 Fiscal Year $8.5 Million Air Pollution Control Fund $15.7 Million Loan from Motor Vehicle Account (ARB) $300,000 Loan from Motor Vehicle Account (Cal/EPA)

2008/2009 Fiscal Year $32 Million Loan from Beverage Container Recovery Fund

(ARB and Cal/EPA)

2009/2010 Fiscal Year $35 Million Budgeted Loan from Beverage Container

Recovery Fund-Do not anticipate using

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Loan Repayment Schedule


Loan Repayment Schedule

Payment Due Estimated amount due including interest

(millions)

June 30, 2010 $ 14.8 (MVA only)

June 30, 2011 $ 15.1 (MVA and BCRF)

June 30, 2012 $ 14.8 (MVA and BCRF)

June 30, 2013 $ 13.7 (BCRF only)

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Total Revenue Required FY 09 10Preliminary


-Total Revenue Required FY 09-10Preliminary

• Total Revenue Required - $54 million – Program Costs - $39 million

– Debt Repayment - $15 million

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Sector Specific Fee Estimates FY 09 10- -Preliminary based on TRR $54M


Sector-Specific Fee Estimates FY 09-10 =Preliminary based on TRR=$54M

Emissions Source Emissions

(Million MTCO 2E) Estimated Fee

(Million)

Share of Costs by Emissions Source

(%)

Refinery Process Emissions 33.9 $4.3 8.2

Gasoline 143.4 $19.2 34.8

Diesel 42.8 $5.6 10.4

Natural Gas 124.5 $16.1 30.2

Associated Gas 3.2 $0.4 0.8

Cement 8.4 $1.1 2.0

Non-Cement Coal Use 5.7 $0.7 1.4

Electricity Imports 49.6 $6.6 12.1

Total 411.7 $54.0 100.0

Note: Emissions data from 2006 ARB Emissions Inventory, all other entries based on ARB calculations.

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Costs per Unit ProductPreliminary


Costs per Unit Product Preliminary

2009/2010 Pass Through

Product 2009/2010 Program Costs

Program Cost + Loan Repayment

Natural Gas ($/therm) 0.0005 0.0007

Gasoline & Diesel ($/gallon)

0.001 0.0014

Cement Manufacturers ($/ton)

0.05 0.07

Imported Electricity ($/MWh)

0.05 0.07

Coal ($/short ton) 0.20 0.28

Approximate Cost per Californian

$1.00 $1.50 47




ARB Process for Determining Expenses

• Approved BCPs – Salaries and staff benefits – Operating expenses and equipment – Other costs

• Contracts

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Questions or Comments?


Questions or Comments?

Jon Costantino, Manager Climate Change Planning Section [email protected]

(916) 324-0931

Lead Staff: Jeannie Blakeslee [email protected]

(916) 445-8286

Legal Questions Bob Jenne Assistant Chief Counsel [email protected]

(916) 322-3762

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